$900 MacBook would grow Apple's addressable market by 67%

Shares of Apple are on the rise after Bernstein Research upgraded the Mac maker and said a new MacBook priced at $900 would broaden the company's potential notebook customer base by 50 percent in terms of both units and revenue.

"We are upgrading Apple to Outperform - while reducing our target price from $175 to $135," analyst Toni Sacconaghi wrote in a research note to clients. "We believe that the stock is overly discounted, that Apple's short-term financials are likely to remain relatively healthy despite economic weakness, and that the company's longer term growth story remains intact."

Sacconaghi turned a particular focus to Mac growth, which he said is the "biggest wildcard among Apple investors today." He said that even if the global PC market remains flat in 2009 and Apple's share gains slow by 25 percent, the company would still see approximately 13 percent Mac growth.

"We feel confident that Apple will be a share gainer, as the company continues to expand distribution and purchase intention remains high," the analyst wrote. "Perhaps most importantly, we expect Apple to lower price points to address a much broader market at some point over the next year."

To this end, Sacconaghi pointed to a recent internal analysis which revealed that a MacBook priced at $900 would expand Apple's addressable notebook market by nearly 50 percent on a revenue basis, and 67 percent in terms of units. Should rumors of a $800 MacBook prove true, it would broaden the company's addressable market by 69 percent in terms of revenue, the study found.

While such moves would undoubtedly pressure gross margins, the analyst notes that the company already factored this into its forecasts when it guided gross margins down 150 basis points for fiscal 2009 even given the expected positive impact from iPhone sales.

"Apple's cost structure has high variable costs, creating less earnings downside risk than many investors may realize," he added. "Given its extensive use of contract manufacturing, Apple's COGS (Cost of Goods Sold) are nearly entirely variable, and operating expenses relative to gross margins are low; the upshot is that Apple's earnings per share suffers less to a given revenue reduction than many of its peers."

In the short term, Sacconaghi said predicting Apple's share price and direction may prove difficult given a number of factors, which could lead to fluctuations between $75 and $135. In particular, he said the company's upcoming revenue guidance for the December quarter could apply new pressure on shares. The Street is looking for sales just shy of $11 billion for the three-month period, but given the company's traditional practice of providing conservative estimates, management could wind up guiding $1 billion below expectations.

Also complicating matters is the difficult compare that exists between the December quarter of 2007 and the December quarter of 2008, namely expectations of a more than 20 percent fall-off in iPod revenues, a tougher consumer spending environment, and the absence of software revenue generated by last year's Leopard launch.

Looking a bit further down the line, the Bernstein analyst said he's confident Apple's secular growth story remains in tact. He expects Macs to continue to grow at least 9-10 percent annually, and said Apple TV holds the potential to "act as the centerpiece of the digital home, and could ultimately morph into a capable set-top box replacement."

In the meantime, he believes the company holds a " unique opportunity" to convert its iPod install base — estimated at 120 to 130 million — to iPhones.

An update to Best Buy's inventory system, noted over on our Backpage blogs (RSS), includes six new models with prices inline with today's offerings. There is, however, a question of whether Best Buy is making assumptions, as is sometimes the case, or acting on advance knowledge from Apple.

Well I hope the stocks aren't up 8% because of a rumor on the prices going down, because then the stocks may slide tomorrow. Obviously as someone pointed out the whole market is up today.

But also Gizmodo and 9to5 are showing printout from Best Buy that show the prices are the same. So if they are true, only a new model would perhaps have that price point or it will just be the same as always (which Apple tends to never lower prices, just increase specs.)

I think apple will just not raise the specs on the base model on the new macbooks as much and get an 800-900 starting price which can easily go up after you add more ram, cpu speed, etc. But they really need to fill in the gap between the ultra cheap dells for 500 bucks and their cheapest model at 1100

I just hope they keep the ease of upgrade for the MB - that's one of the biggest factors for me. I can have apple give me 1GB and then order a 4GB set from crucial and if my HD ever gets too small or anything it's just a quick easy job to replace it.

$800 MacBook? Bring it on I say. It's about time Apple took the bull by the horns and went after the "less expensive" end of the notebook market. There are a hell of a lot of consumers at this end of the market and many $$$'S to be had from them.

How many people, realistically, do you know that spend $1500 or so on a notebook? A few. The real share of the market is at the lower end. Apple could win a lot of hearts and minds with a cheaper machine.

Rumors like this are toxic, because everyone is going to decry Apple when it inevitably doesn't arrive, all because of the built up expectation from a rumor that probably has no basis, and now Apple is going to look like the bad guy when fancy new MacBooks are released tomorrow at the same price point as before.

I don't think we will see a cheaper macbook anytime soon, i do see the cheapest macbook coming with a super drive and a LED backlit screen and staying at the same price, but not price cut, not while Apple can just improve the hardware and leave the price the same

My comment about you attributing the 8% rise in Apple stock to this analyst's report was fair, in that linking the two was wrong when the the market in general is up and Apple is obviously benefiting from a market rebound and not this analysts.

If you don't like the comment, then state why and argue your logic. Don't just delete the post like a coward.